TY - JOUR
AU - Kennickell,Arthur
AU - Lusardi,Annamaria
TI - Disentangling the Importance of the Precautionary Saving Mode
JF - National Bureau of Economic Research Working Paper Series
VL - No. 10888
PY - 2004
Y2 - November 2004
DO - 10.3386/w10888
UR - http://www.nber.org/papers/w10888
L1 - http://www.nber.org/papers/w10888.pdf
N1 - Author contact info:
Arthur Kennickell
Board of Governors
Federal Reserve Board
Washington, DC 20551
Tel: 202/452-2247
Fax: 202/452-5295
E-Mail: abkennickell@gmail.com
Annamaria Lusardi
The George Washington University
School of Business
2201 G Street, NW
Duques Hall, Suite 450E
Washington, DC 20052
Tel: 202-994-8410
E-Mail: alusardi@gwu.edu
AB - We assess the importance of the precautionary saving motive by relying on a direct question about precautionary wealth from the 1995 and 1998 waves of the Survey of Consumer Finances. In this survey, a new question has been designed to elicit the amount of desired precautionary wealth. This allows us to bound the amount of precautionary accumulation and to overcome many of the problems of previous works on this topic. We find that a precautionary saving motive exists and affects virtually every type of household. Even though this motive does not give rise to large amounts of wealth for young and middle-age households, it is particularly important for two groups: older households and business owners. Overall, we provide strong evidence that we need to take the precautionary saving motive into account when modeling saving behavior.
ER -